Craft Gin Club: a tonic for SME success

Jon Hulme and John Burke founded their company Craft Clubs in January 2015, growing it into a successful business in under two years (albeit with a recent touch of catalytic help from renowned BBC Two series Dragons’ Den).

But how have Jon and John succeeded where others failed (another alcohol subscription box company closed a month ago, just as Craft Clubs was flourishing)? How did they hit upon an idea that not only captured their customers’ imaginations, but those of television’s most beloved – and feared – angel investors?

Burke and Hulme (apologies for failing to ask whether they ever contemplated a grave-robbing startup) met in 2009 in Madrid, where they went to business school. A city famed for its enthusiastic consumption and gourmet appreciation of G&Ts, the Jo(h)ns spent many evenings bonding over post-class drinks – which both agree made a greater contribution to their success than anything they were taught.

“The most useful thing the school did was introduce us to each other,” says Jon. “It’s useful to be able to talk intelligently about different facets of business, but in a year’s course covering all facets of the business you only get a brief grounding in each area. Ultimately you learn a lot more by doing it.”

John concurs: “It’s getting to know people on a personal level, listening to their real-life experiences and absorbing those that helps you. You can learn from that, and project it back into your own business.”

“They realised the idea had been staring them in the mouth for years”

As if they had built a time machine to visit the future and listen to their own advice, the Jo(h)ns of 2014 hit upon their business idea by very literally absorbing their own real-life experiences. Having been on the lookout for a project to work on together ever since leaving business school, they were drinking in a Mayfair pub – bathed in the siren call of 50 or so craft gins stacked seductively behind the bar – when they realised the answer had been staring them in the mouth for years.

“That was the germination moment,” says Jon. “From there we began to think about doing something with gin. It could have been opening a distillery or opening a shop – but we didn’t have much capital to put to work.”

“There’s no point saying ‘I’ve got no money – I’m going to start an airline'”

This is one of the issues that looms at the forefront of many entrepreneurs’ minds and has hobbled countless start-ups. But Jon suggests that the extent to which lack of capital is a problem is essentially a matter of perspective: “If you don’t have capital you need to choose a different business model – there’s no point saying ‘I’ve got no money – I’m going to start an airline’.”

“Quite often when people want to start a business they start out with a white piece of paper and put all kinds of possibilities on there, and it’s really hard to come up with a concrete path to follow doing it that way.”

Instead, knowing your limitations can help formulate your business; this is what Jon calls the Innovation Cage. “You build a cage around yourself and say ‘what can’t we do?’, and that helps you come up with an idea you can execute against. In our case, we didn’t have much capital, and that’s one of the reasons we ended up with a subscription model – because it lends itself to a slow roll over time.”

“You build a cage around yourself and say ‘what can’t we do?'”

With the idea in place, John and Jon set about growing their business slowly and incrementally, so that they could adjust and adapt as they expanded, and find out what their customers liked. Jon refers to the process as ‘test and learn’.

“It’s not about having a big grand idea for world domination and trying to get there in one leap; it’s about designing small tests that nudge you forward towards that destination: organising yourself to find time to deliver; getting a website live; getting a Facebook page up; getting your first customer.”

They were clear from the outset that Craft Gin Club would be a content-driven business model, says John. “Content is key – it only costs time. We interviewed people, pulled stuff off the web and started to create an audience that way – getting the content under people’s noses that’s useful or entertaining and isn’t just ‘buy me, buy me, buy me!’”

The pair’s assumption that content would drive the visibility of their business was borne out in January of 2015 when they had a post go viral for the first time; their tongue-in-cheek blog post “5 reasons why gin is perfect for New Year’s detox” got over a million views and seven thousand shares on Facebook.

“We went into January with 8 customers and came out with over 80,” says Jon. “It was a real proof of life moment where we realised that we have a product people would actually like to sign up to if we can get it in front of them.”

Another major moment for Craft Gin Club was – in the process of their ‘test and learn’ phase – the introduction of different subscription options; allowing customers to sign up for bi-monthly and quarterly gin boxes caused an uptick in membership. As time progressed they developed their product into something that became more and more like a gift. Club members never know what gin they will be receiving, and the duo’s decision to start including complementary mystery treats (tonics, vermouths, olives, gin sweets) added to the sense of anticipation and excitement that was building around their boxes.

“You’re opening the box, and you know there’s gin in there, but the other stuff you’ve got no idea about,” says Jon. “One of the phrases we hear over and over again is ‘oh my god it’s like Christmas.’ You’ve got these adults in their 30s, 40s and 50s going gaga over this box and that’s really cool.”

The Jo(h)ns were very cleverly shaping their gin boxes into something that felt more like an event than a product, and their customers were responding in kind on social channels in a way that allowed their customers to engage with the club and develop a community.

“It’s not something we expected at the beginning,” says John. “They not only share with us but share with each other, talking with each other through our social media channels and sharing pictures of the boxes with everybody. It has really reinforced the trust that new members have as well.”

There is still much to learn on the logistical side of things, however. As their company grows, they feel lucky to have found suppliers who were willing to take them on and support them when their business was very low value – a decision that has paid off now the Craft Gin Club is a decent-sized client. As an SME that imports a significant amount of gin from abroad, however, they are finding the foreign payments landscape quite varied and fragmented.

“It’s not the easiest thing for a small business to hedge FX exposure in a cost effective way”

“Some suppliers overseas have UK entities or UK bank accounts,” says Jon. “Some suppliers overseas have a pound denominated bank account in the foreign country. For example, with a German supplier we’ve been using recently, we contract in pounds and pay them in pounds into their German account.”

“On the other hand, some foreign suppliers only have a Euro account and want to contract in Euros, which makes it difficult because you’ve then got FX costs as well as FX exposure. It’s not necessarily the easiest thing to do for a small business to hedge that exposure in a cost effective way.”

Like many small and medium sized businesses that make international payments, it almost seems as if Craft Gin Club could benefit greatly from a simple platform that would allow them to easily make foreign transactions at institutional rates while minimising their FX costs. Subtle cough.

Tune in for part two tomorrow to find out how an unusually dramatic appearance on Dragons’ Den in July 2016 nudged Craft Gin Club into the stratosphere.

James is freemarket’s Chief Commercial Officer. He has a history of finding new ways to solve age-old financial challenges and was responsible for launching some of the first online money transfer and prepaid card initiatives in Europe.